Assessing the Quality of Self-Reported Financial Information

Abstract

It is well known that self-reported financial information differs from administrative records. This article advances previous studies by using a unique matched representative sample of individual borrowers from the Chilean Household Finance Survey with administrative banking loan records. Our linked dataset allows us to test whether the differences between the two sources are due to the number of nonreported loans or to differences in the reported loan amounts. We show that discrepancies in debt ownership are larger when respondents have a mortgage and are not the highest income member of the family, when respondents have weak financial literacy and do not have confidence in the study, and when respondents live in complex or multigenerational households. However, borrowers report the maturity of their mortgage and installment loans quite accurately. Concerning loan amounts, differences between the two sources decrease with the financial literacy of the respondent. Finally, a simple form of rounding can go a long way towards explaining differences in the middle part of the debt amount and maturity distributions.

Credit card repayments in a Latin American country: a psychological perspective

“…Individuals would not be considering their real level of debt to rationally determine their degree of liquidity constraint, but are only considering their subjective perception (Keese, 2010). This result is confirmed with the importance of self-reported measures of indebtedness, because they provide a more comprehensive view of households’ financial situation (Cifuentes and Martínez, 2020; Madeira et al. , 2022).…”

“…Individuals would not be considering their real level of debt to rationally determine their degree of liquidity constraint, but are only considering their subjective perception (Keese, 2010). This result is confirmed with the importance of self-reported measures of indebtedness, because they provide a more comprehensive view of households' financial situation (Cifuentes and Mart ınez, 2020;Madeira et al, 2022). In half of the estimates, the variable defining the presence of an unfavorable situation that leads to diversion from the family budget presents significant marginal effects, being negative in the case of the upper payment section of the monthly account statements, and positive for payments belonging to lower sections.…”

“…Cifuentes and Mart ınez (2020) emphasize the importance of considering self-reported indebtedness measures (e.g. perception of its level) because they provide a more comprehensive view of the household financial situation (Madeira et al, 2022) than those obtained from financial indicators. They also find that temporary workers are more prone to over-indebtedness that people with permanent contracts.…”